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Wenco Financial Planning
Glossary

U

underwriter (banking)

A person, banker or group that guarantees to furnish a definite sum of money by a definite date in return for an issue of bonds or stock.

underwriter (insurance)

The one assuming a risk in return for the payment of a premium, or the person who assesses the risk and establishes premium rates.

underwriter (investments)

In the bond/stock market means a brokerage firm or group of firms that has promised to buy a new issue of bonds/shares from a government or company at a fixed discounted price, then arranges to resell them to investors at full price.

unemployment rate

The number of people unemployed measured as a percentage of the labor force.

unified credit

A credit that may be applied against an individual's gift or estate taxes. The unified credit will increase in gradual steps until it eventually exempts an estate valued up to $3,500,000 from federal estate taxes in 2009.

universal life insurance

An adjustable Universal Life insurance policy provides both a death benefit and an investment component called a cash value. The cash value earns interest at rates dictated by the insurer. The policyholder may accumulate significant cash value over the years and, in some circumstances, "borrow" the appreciated funds without paying taxes on the borrowed gains (taxes may be required if policy is surrendered). As long as the policy stays in force the borrowed funds do not need to be repaid, but interest may be charged to your cash value account. Premiums are adjustable by the policy owner.

V

variable investment

Any investment whose value, and therefore returns, fluctuates with market conditions such as a common stock, a plot of raw land, and a hard asset.

variable universal life insurance

A type of life insurance that combines a death benefit with a savings element that accumulates tax deferred at current interest rates. Under a variable universal life insurance policy, the cash value in the policy can be placed in a variety of subaccounts with different investment objectives. The policyholder can transfer funds among the subaccounts as he or she wishes. Fees are charged after a certain number of transfers.

variable rate mortgage (VRM)

An initial interest rate that is usually lower than a fixed rate, but that adjusts periodically according to market conditions and financial indices. The rate may go up and/or down, depending on economic conditions. To limit the borrower's risk, the VRM will almost always have a maximum interest rate allowed, called a "rate cap."

venture capital

A term for funds that are invested by a third party in a business either as equity or as a form of secondary debt. In the event of failure or business wind-up, these funds rank behind all other secured creditors.

vesting

The law requires that a qualified plan have a schedule under which a participant earns an ownership interest in employer provided contributions based on his or her years of service with the employer. Amounts contributed by the participant are always 100% vested.

viatical settlement

Occurs when a person with terminal or chronic illness sells his/her life insurance policy to a third party for an amount that is less than the full amount of the death benefit. The buyer becomes the new owner and/or beneficiary of the life insurance policy, pays all future premiums, and collects the entire death benefit when the insured dies. Some states regulate the purchase as a security while others may regulate it as insurance.

volatility

The range of price swings of a security or market over time.

W

waiver of premium

An insurance policy sets for conditions under which premium payments are not required to be made for a time. The most popular waiver of premium rider is the disability waiver under which the owner of the policy (also called the policyholder) is not required to make premium payments during a period of total disability.

whole life insurance

A type of life insurance that offers a death benefit and also accumulates cash value, tax deferred at fixed interest rates. Whole life insurance policies generally have a fixed annual premium that does not rise over the duration of the policy. Whole life insurance is also referred to as "ordinary" or "straight" life insurance.

will

A legal document declaring a person's wishes regarding the disposition of their estate. A will ensures that the right people receive the right assets at the right time. If an individual dies without a will they are said to have died intestate.

wrap account

An account offered by investment dealers whereby investors are charged an annual management fee based on the value of invested assets.

write-off

Any loan not expected to be recovered and is recorded as a loan loss.

Y

yield

The amount of current income provided by an investment. For stocks, the yield is calculated by dividing the total of the annual dividends by the current price. For bonds, the yield is calculated by dividing the annual interest by the current price. The yield is distinguished from the return, which includes price appreciation or depreciation. The yield on an investment is the total proceeds paid from the investment and is calculated as a percentage of the amount invested.

Z

zero-coupon bond